Should You Unplug From Plug Power?

Shares of Plug Power(NASDAQ:PLUG) have been on fire, more than doubling in the two days. In a press release and conference call, management guided for 2014 profitability -- again. While such forecasts are generally a positive for any speculative company, a closer look at past statements from Plug Power should give Foolish investors at least some pause.

Blowout quarter On Dec. 4, Plug Power stated that it received $17.8 million in bookings since Oct. 8, and it expects $30 million to $40 million more in orders by the end of the quarter.

For a company that only did $4.6 million in sales last quarter, that's a significant jump. Plug Power went on to say that it expects profitability in 2014, and as it books more orders in December, it is on track for a "blowout quarter."

Old news? While this information certainly is positive, most of it was already known and public. In Plug Power's third-quarter release on Nov. 14, the company stated that it had $14 million in bookings since Oct. 8.

Do a little algebra, and you'll notice that out of the $17.8 million in bookings from the more recent release, only $3.8 million of that figure was new. It's not bad, but it's a relatively small increase compared to the prior figure of $14 million.

As for the increase in new orders expected mentioned in the Dec. 4 release, management already told the market to expect that back with earnings in November when it said it was expecting several "large customers seeking sales agreements" to close in the fourth quarter. CEO Andy Marsh even forecasted profitability then too and used the exact same words: "a blowout quarter."

Foreshadow of a rally It may seem a bit strange for Plug Power to seem so excited over repeating forecasts about deals still not yet closed, but a peek at what Marsh said in the third-quarter conference call may reveal why:

I'd like now to move the conversations to address our current status with the NASDAQ. We're still in discussions with NASDAQ concerning our listing pricing deficiency. We have conveyed our potential remedies to rectify this situation. Our focus remains on increasing the stock price to resolve this issue organically.

Mission accomplished?

What about the past? When judging the strength of management forecasts, it's always a good idea toweigh in on the past. Marsh doesn't exactly come off as the next Nostradamus.

For example, way back in March of 2009, Marsh said, "We will continue to grow our business and forge a path to profitability in 2009." Four years later, investors are still waiting.

More recently in August of 2012, Marsh stated, "With the continued improvement in reducing our product costs, profitability is within reach." He explained that in order to get profitable, material costs had to come down to under 70%, and Plug Power was targeting 60% in 2013.

Fast-forward to Q1 and Q2 of 2013. Marsh stated both times that the "worst case" for material costs is 67%. In Q3 2013, it was still over 70% and is "targeting 67% material cost." What went from a forecast of 60% became a worst case of 67% -- and now the company's just hoping to achieve what was supposed to be the worst case.

Compare to FuelCell Energy Though it's not a perfect comparison, FuelCell Energy(NASDAQ:FCEL) is another fuel cell company. It operates on a much bigger scale and with a different technology, but it attracts the same type of investing crowd.

FuelCell Energy has been growing like a weed. Sales last quarter were up 81%. Plug Power "expects" backlog, but FuelCell Energy already has it, with orders in the hundreds of millions, compared to sales of just $53.7 million last quarter.

Like Plug Power, FuelCell has been beating the profitability-is-coming drum for the last two quarters -- though FuelCell's forecasts are based more on results than predictions. And with FuelCell Energy trading at a market cap not too far beyond Plug Power's, it appears that Plug Power's shares may have gotten a bit ahead of themselves.

Foolish final thoughts It seems like Plug Power's management has a history of overpromising and underdelivering. Since management can't seem to get its own forecasts right, how can Foolish investors figure it all out and invest accordingly?

Plug Power may very well do everything it plans and more in 2014. However, with the stock more than doubling in two days, and given management's overly optimistic history, Fools may want to wait on the sidelines for more solid results.

Author

Nickey is a select freelancer for the Fool. She writes about food & beverage, dry bulk shipping, and whatever else floats her boat. After selling four successful restaurants, she turned in her knives for a pen and now puts her passion for food, hospitality, and transportation in writing. You can send email to her at nickeyfriedman@gmail.com
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